GDP grows 6.2% on rising government, consumer spending

For Preliminary Examination:  GDP, GVA

For Mains Examination:  GS III - Economy

Context:

India’s real Gross Domestic Product (GDP) grew 6.2% in the October to December 2024 period, the third quarter of the fiscal year, picking up pace from the 5.6% growth recorded in the previous quarter, according to data released by the National Statistics Office (NSO)

Source: The Hindu

Read about:

Gross Domestic Product (GDP)

National Statistics Office (NSO)

Key takeaways:

• Gross Domestic Product (GDP) and Gross Value Added (GVA) are two key economic indicators used to measure the economic performance of a country or region, but they approach this measurement in slightly different ways.
• GDP is the most widely recognized measure of a country's economic activity. It represents the total monetary value of all goods and services produced within a country's borders over a specific period, typically a quarter or a year.
• GDP can be calculated using three approaches: the production approach, the income approach, and the expenditure approach.
• The production approach sums the outputs of all sectors of the economy; the income approach adds up all incomes earned by individuals and businesses, including wages, profits, and taxes minus subsidies; and the expenditure approach totals all spending on final goods and services, including consumption, investment, government spending, and net exports (exports minus imports). GDP provides a broad overview of the economic health and size of an economy.
• GVA, on the other hand, focuses on the value added at each stage of production. It measures the contribution to the economy of each individual producer, industry, or sector.
• GVA is calculated by subtracting the cost of inputs and raw materials from the total output. Essentially, it captures the value created by an entity after accounting for the costs of goods and services used in the production process.
• GVA is particularly useful for understanding the productivity and efficiency of specific industries or sectors within an economy. When GVA is summed up across all sectors and adjusted for taxes and subsidies, it equals GDP.
• In summary, while GDP provides a comprehensive measure of the overall economic activity within a country, GVA offers a more granular view by focusing on the value added by individual sectors or industries.
• Both metrics are crucial for policymakers, economists, and analysts to assess economic performance, identify growth drivers, and make informed decisions.
• GDP gives a macro-level picture, whereas GVA helps in understanding the micro-level contributions of different parts of the economy. Together, they provide a more complete understanding of economic dynamics

Follow-Up Question

1.With reference to Indian economy, consider the following statements: (UPSC CSE, 2015)
1. The rate of growth of Real Gross Domestic Product has steadily increased in the last decade.
2. The Gross Domestic Product at market prices (in rupees) has steadily increased in the last decade.
Which of the statements given above is/are correct?
(a) 1 only